Hachette Livre's Nourry discusses Amazon and e-books

Arnaud Nourry, the chairman and chief executive of Hachette Livre discusses the terms impasse with Amazon and the future for print and 'e'

Hachette Livre will move into its new purpose-built offices in Vanves (on the outskirts of Paris) on April 7. Even though the new building is very elegant, isn’t it a handicap for the group to be based on the periphery of the capital ?

The group will remain loyal to its traditional diversity since numerous subsidiaries will remain in the heart of Paris. For the teams now based at the quai de Grenelle in western Paris, the move to Vanves will not make much difference : the new building is very close to the metro, while the France 3 television station and publishers Bayard and La Martinière are not far away. For the group, which owns the land, it is fantastic to be able to embark on an adventure that will last at least 50 years. Finally, the quai de Grenelle, where we have never really felt at home, will have been a mere interlude between our historic head office on Boulevard Saint-Germain that dates back to the 19th century and the new building.

For a year, while you were negotiating with Amazon in the United States, you did not speak in public. Was this very tough conflict worthwhile?

It took up most of my time during that period. I did not express myself in public in order not to exacerbate the situation. Yes, it was worthwhile, as always when essential questions are involved. In this case, the question was whether the publisher or the retailer should fix selling prices for electronic books, and take account of the fact that many decisions taken in the United States have an impact elsewhere. I regret that this discussion took the form of a conflict, and I am delighted that we have resolved it. But if it were to be done again, I would do it again. All media industries that have not maintained control over their production in the electronic sphere are in great difficulty. If e-books were sold for $5 a copy, it would only take a few years for everything to change, creating a market without booksellers and a general public accustomed to paying almost nothing. Through huge mergers, the music business is now centred on three major world players. Diversity has been hard hit. Innovation in the sound sector is nothing like what it was 30 years ago. We do not have to the right to let this happen to books, which is the medium for creation, education, culture and democracy.

Your agreement with Amazon calls for improved sales conditions when you reduce your prices: have you reduced them?

No, or at least only when we have wanted to. The principle is not to keep the same prices all the time. So, we reduce them, raise them, test them. This is a marketing technique, and has nothing to do with relations with any distributor.

The conflict revealed an unexpected desire for price regulation in the United States. With its experience of fixed prices in France, how does Hachette Livre explain the fact that it was at the front of Amazon’s firing line?

Hachette Livre has played a special role since 2009-2010, when the agency contract was introduced. But I have no answer to the question as to why Amazon opened sales negotiations with us first. In fact, I hear more and more American publishers and booksellers point out the merits of the (French fixed price) Lang Law. But thinking it might be possible to replicate it over there is another thing ! It is not at all in the American culture.

What lessons do you draw from this conflict for your relations with Amazon and the world’s other major digital operators?

First of all, these large companies contribute to the market for books. We must forget the moments of conflict and realize that these companies enable us to reach different customers. Amazon has been a driving force. The same goes for Apple and Google. We must not throw the baby out with the bathwater. Secondly, in terms of relations, even if they are infinitely larger than we are, our creative capacity through our authors gives us a symbolic strength and consequently bargaining power. Last year, I was impressed by the number of authors who mobilized to push us to resolve the conflict. The situation is the same in France when we negotiate with a partner, which makes me confident and optimistic for the future of this (publishing) profession. But we must be able to control prices. If not, holding exclusive rights of our authors’ work will do nothing for us.

What impact did the affair have on your accounts for last year?

I cannot give very precise figures. It obviously weighed on the digital sales of our U.S. subsidiary, but it was only marginal in the 26 million-euro drop in our profits last year. The decline was mostly the consequence of our success the previous year with Fifty Shades of Grey and Asterix, and the contraction of school textbook publishing in France. Despite all that, we achieved a solid year.

Even so, Hachette Book Group moved its New York offices from Park Avenue and implemented a savings plan.

The two are not linked. We moved because the owner and we had different ideas about the level of the rent. As for the savings plan in spring 2014, it was on a similar scale to that carried out by all the major American groups a few years earlier. We were able to postpone the cuts because in 2009-2011, the hardest period for American publishing, we benefited from the success of Twilight.

How do you, with two-thirds of the group’s sales reported abroad, analyse the evolution of the world’s book markets?

It is interesting to note that the market in Anglophone countries, which has changed dramatically, is growing again. It has been expanding for the past two years in America, and for the past year in the United Kingdom. This shows that reading remains a popular pastime. In France and Spain, we are suffering from the economic slowdown. This was flagrant between 2011 and 2013, and to a lesser extent in 2014. In France, the market has shrunk by 10% in five years, partly as a result of the disappearance of the Virgin and Chapitre chains. But in a reading country like ours, I see no reason why the market shouldn’t pick up again like it did in the U.S. and the U.K.

Are you planning to invest in France?

As a result of our presence and diversity there, we are not the most active investor, even though we would examine opportunities if they arose. Our priority remains international. Last year, we made five modest aquisitions in the United Kingdom and one in the United States. There are fewer opportunities in continental Europe, but we would look at any that presented themselves.

Is it possible to improve distribution of physical books in France to compete with online bookstores?

That is not really our role. We participate in The Association pour le développement de la librairie de création (Adelc). We have begun to contribute to the Filippetti plan for booksellers. This reflects our attachment to the network of outlets, which I believe they recognise. I am very optimistic for (the future of) independent booksellers. In the United States, where they have had to put up with the growth of digital, this has now stopped and bricks, and mortar stores have emerged stronger than before. Online sales are functional and practical, but are not sufficient for big readers.

How much did you contribute to Adelc as part of the French Publishers Association (Syndicat National de l’Edition) commitment to implement the Filippetti plan?

I don’t disclose that figure. Adelc can do so if it wishes. Other publishers, small and medium, have made a gesture. I wanted to show that large houses can do the same, in the hope this will incite others to follow the example.

We now have sufficient hindsight to take stock of the development of e-books. How do you see it?

In the Anglo-Saxon world, it seems to have peaked at around 25% of the market, but with huge disparities between illustrated books, where it is anecdotal, and mainstream literature, where it accounts for 40% or even 50% for romantic fiction. Donna Tartt’s The Goldfinch is at 50-50. The 25% share has not changed for 18 months in the United States, and it is almost at that level in the United Kingdom. I draw five conclusions from this. The first is that there will not be a massive shift to digital for books, but cohabitation. Two: regrettably, digital has not expanded the market nor reached other sections of the public, it is a substitute. Three: the change in our profession has forced us to acquire new skills and reorganize our production methods and marketing, but it has not affected our fundamentals—talent in finding texts, and preparing and selling them. This explains why 1,000 leading authors signed a petition supporting us in the New York Times last year. Four: digital does not harm the economics of publishing. When you book at the accounts of Simon & Schuster or HarperCollins, you see that they have not suffered much. Five: by increasing authors’ percentages on book sales, their remuneration has been maintained, in contrast to the music business because of the subscription system. It is vital that authors earn as good a living from digital as from print.

How do you explain the fact that e-books have not been successful outside the Anglo-Saxon world?

In the United States and United Kingdom, the major operators have been able to cut prices, which means digital has made inroads because it is attractive. This was impossible in all continental European countries because of regulation (fixed prices) or contracts (the agency model). Finally, when there is no sizeable price advantage, the attraction of digital is low for the consumer. A paper book is easily carried around and does not break down.

In France, the e-book will continue to spread, but slowly, and its penetration rate will be much lower than that in the Anglo-Saxon world. That prediction is based on today’s technology and does not take account of current research and any future breakthrough. Will you change your strategy as a result?

No. I used to think that e-books would reach 12% to 15% of the market much sooner in France. At the rate we are going, it will probably take several years. But that does not bother me. We now have an ecosystem that works. This is why I have resisted the subscription system, which is a flawed idea even though it proliferates in the music business. Offering subscriptions at a monthly fee that is lower than the price of one book is absurd. For the consumer, it makes no sense. People who read two or three books a month represent an infinitesimal minority. And there are bookshops. If I seem like a dinosaur, so be it. My colleagues at Penguin Random House say the same thing.

Do you believe that reforming the European e-commerce directive is an attainable objective ?

I don’t want to give up on the idea. Ministers from four European countries issued a joint statement on the question on March 19. We must give common sense a chance to win out.

Does the Commission’s attempt to call copyright into question worry you ?

Enormously ! One of the new Commission’s priorities is copyright harmonization. Let’s not be fooled : for them harmonization means weakening. Otherwise, they would start with an in-depth analysis of the situation in the different countries to identify the advantages and disadvantages of the current systems and see whether changes were necessary. But there is no sign of such an initiative. One thing is certain: lobbies have been pressing Brussels to weaken copyright protection for years. They even succeeded in having the only Pirate Party MEP write the (European Parliament’s) report on the subject. We will have to fight, and that will keep us occupied for some time. In the United States, "fair use", as demanded in the (Julia) Reda report, has enabled Google to scan our books without permission. Does Europe really want to import that ? European cultural industries exist because we have solid copyright protection. A technocratic approach will not pay off : we shall have to make a big fuss.